1. Technical Field
The embodiments described herein relate to processes for making credit decisions and more particularly to systems and method for sharing risks in lending transactions.
2. Related Art
When a consumer desires to purchase a product or service but does not have the full amount of the purchase price, the consumer will often make the purchase on credit. This may be accomplished via a credit card, seller provided financing, or some combination of the two. If the consumer does not have credit available, the consumer may sometimes apply for credit with a seller or credit provider and wait for an evaluation period before being approved.
Sometimes, such as an urgent or emergency situation, or because an opportunity is time limited, a customer desires to make a purchase but is unable to do so due to lack of credit. The prior art process in such a situation is inefficient in that consumers are forced to abandon purchases, work through independent channels to obtain financing, and then re-start the purchase process. This can take days to weeks to complete. In specific cases where the consumer is purchasing a “large ticket” item such as an automobile or home appliance, the merchant may offer financing, but this is arranged with a specific single financial institution and therefore lacks the usual free-market forces. Because of the delays involved, a consumer may miss out on a purchase opportunity or the seller may miss out on an otherwise credit-worthy customer.
When credit of financing is available, the consumer typically is required to finance the full purchase price of the product/service they are buying and the consumer is typically provided specific terms that they can accept or reject for the transaction. In most cases, the consumer cannot modify the credit offer to meet their specific needs. It is an “all or nothing” offer.
Like the purchaser, the merchant also typically has limited options. A merchant may offer in-house financing, may offer third-party financing, or may not offer any point-of-sale financing. In cases other than in-house financing, the merchant is not able to share in the risk/reward (downside/upside) of financing.
The disadvantages of the prior art credit process is a lack of availability and a lack of customization for the consumer, and a lack of flexibility and ability to participate in financing upsides for the merchant.